next in higher ed: outsourcing as strategy

A hot topic for some time now in Higher Education is outsourcing.  Generally, this has taken the form of using Google for e-mail.  In fact, other than a handful that use Microsoft’s live@edu for e-mail…I can’t think of anyone else doing anything through outsourcing.  No storage, no running of Exchange in the cloud, etc.

Having said that, this is a really heated and controversial topic for a number of reasons.  There is the legal one – FERPA states, essentially, that an educational institution cannot provide student information to an outside organization.  Whether having Google host your e-mail, which is relatively secure behind encryption, etc, is violating FERPA has often been based on interpretation by General Counsel.  Second, I am convinced that there is a strong belief that university data should stay on university servers.  Even more than what most companies feel at an emotional, possessive and perhaps maternalistic level, universities have this suspicion about letting data go.  Academia is free and intellectually unbound and independent – to host data at Google is like selling one’s soul.

Personally, I’m interested in taking this a step further.  Let’s talk about outsourcing as a strategy.  Right now, universities that have gone to Google have done so out of cost savings.  No storage servers, fewer admins, etc, and you save money in providing e-mail to faculty, staff, and students.  This is often the end of the discussion.

But if one were to take the emotional aspect out of things, and presume (fiat power!) that the school’s interpretation of FERPA allows for off-campus storage of student data, then one can start applying more strategy-based approaches to outsourcing.

If we go pure strategic planning, then the question becomes:  does outsourcing either reduce our costs, increase our value, or both IN ORDER TO ESTABLISH AND MAINTAIN AN COMPETITIVE ADVANTAGE.  I use the big letters because competitive advantage is the key driver – not just cost.  If we go cheap but gain nothing but savings and lose out on quality and end up with unhappy users, that’s not a good outcome.

So what is competitive advantage in academia, a staid, non-profit world?  Well, it might mean that we can deliver a better experience to our students through cost savings.  Maybe it’s a whole new service or product that we can do only if we save on costs in other places (so add value here by decreasing costs there).  Perhaps the goal is to better address the needs and actual ways that students work.  If students are using Google mail, then outsourcing to them, even if it costs more (which is usually doesn’t), might still make sense (cost goes up, but so does value).  Maybe it just means we can move our existing system administrators around (cost stays the same in terms of head count, but productivity goes up).

Another key part of this strategic look is price.  Many will respond with “but, other than tuition, which is generally abstracted away from, say, the type of LMS being offered, there is no price.”  That’s not true.  What if the e-mail system is hard to use?   What if the newest and best labs are located far from the residences and you’re located in northern NY state?  What if students at your school are not getting something that others elsewhere do?  These are all prices that students pay.  And by decreasing price (give them the new LMS, or a lab in a better location, which might be funded through decreases in costs via outsourcing) and/or increasing value (by offering better systems, even if costs don’t go down), you increase the consumer surplus.  This is the gap between value and price.  And the bigger that gap, the more students will feel “happy” about what they are getting for their tuition dollars.

So now, rather than offering Google mail because you can’t afford to run all of those storage servers yourself, you start thinking about outsourcing to Google to save on administrators and storage, and funneling those personnel and dollars to other, value-adding projects.  You also think about the other applications that Google offers – after all, why go to Google if it offers 10 things and you use only 1?  Why not get even more value out of it by fostering use of Google Docs and Sites?

Ultimately, this takes the idea of outsourcing in academia to a different place.  One outsources because it makes sense for long-term strategy.  Which means that interpreting FERPA might have a different angle.  But it’s all fueled by value to students, the price they have to pay, and controlling costs on your end.  All three must be considered.